eclac/gtz, renewable energy sources in latin america and the caribbean: situation and policy...

7/31/2019 ECLAC/GTZ, Renewable Energy Sources in Latin America and the Caribbean: Situation and Policy Proposal, 5-2004

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RENEWABLE ENERGY SOURCES INLATIN AMERICA AND THECARIBBEAN: SITUATION AND POLICYPROPOSALS


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This document has been prepared as part of a joint project with the GermanAgency for Technical Cooperation (GTZ) entitled Promotion of economicdevelopment through the integration of environmental and social policyapproaches in Latin America and the Caribbean. It will be submitted to thedelegations attending the World Conference on Renewable Energies to be held inBonn, Germany, in June 2004 for their consideration. The preparation of thedocument was directed and coordinated by Hugo Altomonte, Chief of the NaturalResources and Energy Unit of ECLAC, Manlio Coviello, Energy Expert, andFernando Cuevas, Chief of the Energy Unit of the ECLAC subregionalheadquarters in Mexico. The text was reviewed by Fernando Snchez-Albavera,Director of the Natural Resources and Infrastructure Division of ECLAC, incollaboration with Jos Javier Gmez, Economic Affairs Officer with theSustainable Development and Human Settlements Division of ECLAC.Technical support for the study was furnished by Hugo Ventura, EconomicAffairs Officer with the ECLAC subregional headquarters in Mexico, andsubstantive inputs were provided by the following international experts: LuizAugusto Horta Nogueira, Odn de Buen, Thomas Scheutzlich, Ricardo Esparta,

Oswaldo Lucon and Alexandre Uhlig.

The project managers are grateful to the Federal German Ministry forEconomic Cooperation and Development (BMZ) for its contribution to theexecution of this study.

The views expressed in this study are the sole responsibility of the authorsand do not necessarily reflect those of the institutions involved.

LC/L.213219 May 2004


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CONTENTS

Page

SUMMARY.................................................................................................................................... 1

I. BACKGROUND ............................................................................................................... 5A. INTERNATIONAL INITIATIVES........................................................................... 5

1. Johannesburg Renewable Energy Coalition (JREC) .............................................. 52. Renewable Energy & Energy Efficiency Partnership (REEEP)............................. 53. World Renewable Energy Conference, 2004 ......................................................... 6

B. INTERGOVERNMENTAL INITIATIVES .............................................................. 61. European Union...................................................................................................... 62. International Energy Agency.................................................................................. 8

C. REGIONAL INITIATIVES: THE CASE OF LATIN AMERICA AND THECARIBBEAN............................................................................................................. 8

1. Latin American and Caribbean Initiative for SustainableDevelopment (ILACDS) ........................................................................................ 8

2. Brasilia Platform..................................................................................................... 83. Declaration of the Latin American Parliament....................................................... 10

II. THE CURRENT STATE OF RENEWABLES IN THE REGION................................... 13A. THE INSTITUTIONAL FRAMEWORKS GOVERNING

RENEWABLE ENERGIES....................................................................................... 13B. CARIBBEAN 1 ...................................................................................................... 17

1. General and policy aspects ..................................................................................... 172. Baseline conditions................................................................................................. 18

C. CARIBBEAN 2 ...................................................................................................... 20

1. General and policy aspects ..................................................................................... 202. Baseline conditions................................................................................................. 22D. CENTRAL AMERICA .............................................................................................. 23


E. MEXICO .................................................................................................................... 351. General and policy aspects ..................................................................................... 352. Baseline conditions................................................................................................. 36

F. ANDEAN COMMUNITY......................................................................................... 371. General and policy aspects ..................................................................................... 372. Baseline conditions................................................................................................. 39

G. EXPANDED MERCOSUR ....................................................................................... 46


III. CURRENT STATUS OF RENEWABLES IN THE REGION......................................... 571. Sustainability of the energy supply ........................................................................ 572. Analysis of total energy supply in Latin America and its subregions .................... 613. Comparative analysis of energy indices in the subregion ...................................... 70


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IV. OBSTACLES, OPPORTUNITIES AND KEY ISSUES FOR THEPENETRATION OF RENEWABLE SOURCES ............................................................. 81

1. General obstacles.................................................................................................... 812. Successful experiences in the region...................................................................... 85

3. The international market for carbon credits ........................................................... 964. The impact of international agreements ................................................................. 98

V. PUBLIC POLICY-MAKING, KEY ISSUES, PROPOSALS AND A STRATEGYFOR RENEWABLE RESOURCES OF ENERGY........................................................... 105

1. Theoretical framework for the formulation of an energy policy ............................ 1052. Comprehensive strategic overview: new issues in public energy and

environmental policies and the implicit value of using renewable energy............. 1093. Key concerns for the region: proposals and action................................................. 1114. Opportunities for emissions provided by the New European Directorate

(EuroKyoto)............................................................................................................ 1235. The success of guaranteed purchase systems or Feed-In in Europe:

an example for Latin America? .............................................................................. 1246. Risk management as a prerequisite for ensuring viable financing ......................... 126

BIBLIOGRAPHY........................................................................................................................... 129

ANNEX .......................................................................................................................................... 135


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SUMMARY

The World Summit on Sustainable Development, held in Johannesburg, August 2002, responded to a new

cycle of global meetings that began with the Millennium Summit. The main characteristic of this newcycle is that the focus of the debate has moved away from declarations of principle toward identifyingobjectives and areas of concrete action, with quantitative commitments and deadlines for compliance.

Debates about energy held an important position in Johannesburg. The positive links betweenaccess to energy, eliminating poverty and improving peoples health and quality of life were emphasized.Although there was agreement on the need to expand the use of renewable energy resources and increasethe percentage of energy produced from renewable sources, unlike other areas of debate, it was notpossible to establish global targets and deadlines. Nonetheless, some regions, among them Latin Americaand the Caribbean through the Latin American and Caribbean Initiative for Sustainable Development, didagree on concrete targets.

The Brasilia Regional Conference on Renewable Energy (Brasilia, October 2003), representednot only one of the first efforts to concretize the target agreed upon on at Johannesburg, but also the firstjoint meeting of authorities and representatives of Latin American and Caribbean Ministries of theEnvironment and Energy. This instance of convergence approved the Brasilia Platform on RenewableEnergies, which establishes among its main points: To further efforts to achieve the goal set forth in theLatin American and Caribbean Initiative for Sustainable Development of ensuring that by the year 2010the use of renewable energy by the region, taken as a whole, amounts to at least 10% of its total energyconsumption on the basis of voluntary efforts and taking into account the diversity of national situations.This percentage may be increased by those countries or subregions that voluntarily wish to do so.

As this paper reveals, in late 2002, Latin America and the Caribbean had already met the targetsestablished in Brasilia, with renewable sources contributing more than one quarter of the Total Energy

Supply1

(25.7%), led by hydro-electric energy accounting for almost 15%, sustainable fuelwood with5.8%, and cane products with 4.1%. The rest of renewables, such as other biomass (0.5%) and geothermal(0.7%) are marginal, while wind and solar energy, although used, are yet not counted as part of energysupply.

The region has an important store of both fossil and renewable resources. The reserve toproduction ratio stands at more than 35 years for oil and more than 40 years for natural gas, whilehydroelectric power potential that is economically feasible stands at more than 500 GW, of which just22% is being used. Despite the resources available, no suitable development of geothermal energy isapparent and, at the same time, it would seem that the contributions of other technologies such as solarand wind power are not duly counted, as we will see below in the subregional analysis.

In preparing this paper, ECLAC has sought to achieve the balanced integration of sustainabledevelopments many components as its referential framework, so this study covers the economic, social,energy and environmental spheres using an integrated perspective. From this perspective, the targetachieved by the region as a whole must be carefully analysed, since there are clear differences betweensubregions and countries within subregions:

1 Note that while the Brasilia platform sets the target as 10% of consumption, this calculation used supply, due tothe problems and methodological limits detailed in chapter 3.


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In terms of the store of natural resources and energy supply and consumption structures; In terms of the institutions and baseline conditions for encouraging policies to promote and

ensure the use of renewable sources.

An analysis of the renewability of the total supply shows that Caribbean subregion 1 (includingBarbados, Grenada, Guyana, Jamaica, Suriname and Trinidad and Tobago) is well below the 10% line,while Mexico is just slightly above it; this means these countries must make a significant effort if theywant to achieve the target for renewables share over total supply, in the case of the former, and to sustainit, in the case of the latter. Those subregions that have achieved the 20% to 30% range (the case of theCaribbean 2 subregion countries, Dominican Republic, Haiti and Cuba, and the Andean Community)should act decisively in both political terms and in promoting renewable energy. Moreover, in certainCentral American countries, Guatemala, El Salvador, Honduras, Nicaragua, the role of forest energy(woodfuel) is very important and if, on one hand, in terms of sustainable development this is positive,since it points to weak use of fossil fuels, on the other it is clearly negative, due to the strong impact onnational forestry resources and the quality of users lives.

In contrast, in countries where the use of biomass for energy purposes is virtually non-existent, asin Argentina, Mexico, Venezuela and Ecuador, problems of sustainability could exist due to the heavy useof fossil fuels at the final industrial and residential level, and intermediate consumption in generatingelectric power. In these countries, hydrocarbons account for 80% to 90% of total energy supply.

Apart from this general positioning of the subregions and certain countries in terms of thisinitiative, other points of analysis arise that should be explored, due to both the medium-term implicationsof this positioning and the composition and structure of sustainability of the energy supply.

The Residential Sustainability Index (RSI) reveals the importance of fuelwood in supplyingfamilies basic calorie requirements, mainly for cooking, heat, and hot water. A high RSI means that thecountry is heavily dependent on fuelwood to satisfy the populations needs. This study has revealed a

wide range of technologies using fuelwood combustion and conditions of use throughout the region,which are relevant in terms of energy efficiency and negative health effects.

The RSI can also be read in terms of social liabilities, with reference to the general populationspoverty levels and the access that people in marginal urban and rural areas have to better quality energysources. Thus better quality sources are generally associated with a higher monetary cost, but also togreater efficiency and higher yields, to less time spent gathering fuel and to lower levels of householdpollution.

The subregions most dependent on fossil fuels (Caribbean 1 and Mexico) are below the RSI lineof 20%, as they are heavy users of secondary liquid hydrocarbons. In this case, they could post aconsumption of useful energy and therefore a higher level of satisfaction of the basic requirements for

caloric use, than the other subregions. At the opposite extreme are the Central American countries, with aratio that is over 1.4 times, which indicates not only an excessive dependence on fuelwood in both ruraland marginal urban areas, but also an insufficient supply of the necessary basic calories, in terms of bothaccess and quality.

Another indicator that to some degree measures the sustainability of energy systems is thePolluting Electric Power Generation benchmark (Generacin Elctrica Contaminante), measured by theamount of CO2 emitted as compared to total electric power production (tons CO2/GWh). Generation inthe Caribbean subregions 1 and 2, and Mexico, is particularly polluting in terms of CO2 emissions. In


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Mexicos case, this reflects the dominant role of fossil fuels in generation (almost 70% of the total isthermal). In the case of the Caribbean countries this role is clearly associated with a less efficientgeneration process with low yields in terms of thermal generation.

As expressed above, the specific objective of this document has been to analyse the sustainabilityof energy supply to 2002. That is, we have attempted to portray the situation up to the year 2002,obtaining positive conclusions in some cases and questions in others.

The application of a more dynamic, rather than static, analysis, remains pending. This wouldinvolve proposing a set of possible scenarios for the progress of Latin American and Caribbean countriesand identifying the national, subregional and regional conditions that prevent those countries orsubregions that do not meet the Latin American Initiative target from approaching these goals. Likewise,it could suggest ways for those that meet them, but run the risk of slipping below them, to redirect trendsand policies toward the more sustainable development of their energy sector.

The detection of specific barriers along with other actions should become the basis for public

policies in favour of renewable energies. The barriers to implementing energy efficiency and renewableenergy measures are well documented and generally fall into five categories: technical, regulatory,economic, financial and institutional. This document includes an analysis of these barriers and adds a newtype of obstacle detected, which has to do with specific social behaviour in the region.

From the diagnosis included in this study comes the need to develop and modernize institutionalstructures to truly integrate public policies and, moreover, encourage synergies with internationalfinancing and private investment. Thus, just as the most important task of the past decade was to buildenvironmental institutions, the fundamental task for the coming decade must be to ensure that theenvironmental theme fully penetrates the economic and social agenda. An essential element in making thetransition to the full incorporation of environmental sustainability into the economic agenda requirestreating it as an opportunity and not merely a restriction on economic development.

Similarly, it is necessary to reduce the room for multiple governmental errors that appears duringthe complex process of managing, formulating, articulating and coordinating public interventions. Thequality of and interactions among an important set of organizations, institutions and public policies mustalso be improved; these are often considered separately, as if they were bodies with a life of their own,autonomous from each other. This is common in several of the cases examined, in which programmesattempted to achieve wide penetration of renewable sources, but later proved to provide insufficientinformation and incentives to ensure the necessary integration, coherency and coordination of sectoralpolicies with each other and in relation to the general objectives of energy policy. Moreover, this wascompounded by the fact that all subregions experience the presence of multiple, isolated internationalactors, governmental and intergovernmental, regional and extraregional bodies, NGOs, etc., which getinvolved in different policy spheres (generally speaking, project design and implementation).

As a result, in the case of renewable sources, it is clear that political authorities and instancesmust be defined to establish the necessary mechanisms, as occurred with the process of reforming theenergy system. Countries should therefore explicitly include in their strategic efforts a greater penetrationof renewable sources that contribute to achieving greater energy security, and a more efficientenergization in the framework of anti-poverty programmes; mitigate environmental problems; and, giventhe greater use of external sources, permit foreign currency savings. This implies that alliances must bebuilt with local groups, within the framework of international cooperation.


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Essentially this strategy proposes reproducing the conditions on which the changes arising fromreforms depended. If these processes were accompanied by actions aiming to change the institutionalorganization, regulatory principles and coordination modes, then these same elements should be involvedin renewable sources (i) to ensure stronger institutions, more in line with the proposal; (ii) to introduce

fundamental modifications to existing regulatory frameworks; and (iii) to change market organization, thedegree of jurisdictional decentralization, access conditions, and areas for the State to provide subsidies.

This therefore assumes that in these three planes the States role will be inevitable, as coordinator ofthe space created to ensure policy viability, intervening directly in investment implementation (ruralelectrification, for example), or through development tools, which make the participation of private investorsattractive. Among the development instruments, taxes and subsidies that act on energy prices could beconsidered, along with a tax on the substitution of sources and/or on the penetration of cleaner sources, toencourage the rational use of energy, environmentally oriented objectives, and others. Undoubtedly, the doseof public intervention and the nature of incentives will depend on conditions in each country.

Today, the issue of renewable energies is placed on the public agenda by those within the

authorities or civil society who are concerned with the environment. This is useful for stimulatinginitiatives for their use, but is not consistent enough in the framework of energy policies, which havetended to give priority to conventional sources, because upon approaching energy from an essentiallyeconomic perspective, renewable energies end up in the background due to their higher entry costs.

This situation is slowly changing, however, since other issues on the public agenda, linked oneway or another with the use of renewable energies, today hold a prominent place in the concerns ofnational and in some cases sub-national governments, in most of the regions countries.

The different initiatives apparent in the regions countries should be incorporated into a vision ofthe energy sector as a whole, making the demands of sustainable development a condition for theirevolution. From this perspective certain strategic lines should arise that guide public policy formulation.

These should suitably weigh the role that renewable energies could play in economic growth,employment, the environment, rural development, universal energization, and the governability ofresources, in particular water.

Based on this integrated vision, this study puts forward four relevant issues and initiatives withconcrete proposals for Latin America and the Caribbean:

A revaluation from an environmental and social perspective of hydro power according tothe demands of sustainable development;

The contribution of renewable sources to the integrated development of rural communities;

The rational use of fuelwood;

The role of biomass and biofuels.

These challenges must be dealt with considering the opportunities contained in the new Europeanlinking directive on emissions (EuroKyoto), which offers the region the chance to enter a globalmechanism trading in emissions, which will attempt to create an institutionalized system as a function ofprojects already identified in the pilot phase of the Kyoto Protocol; and evaluating the possibility ofapplying guaranteed buying modes or Feed-In, which in Europe have enjoyed significant success.


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Chapter I

BACKGROUND

Many international, regional and intergovernmental initiatives and instances today support renewableenergy sources entry into energy markets, in both industrialized and developing countries.

A. INTERNATIONAL INITIATIVES

Although it did not achieve concrete objectives and results, there is no doubt that the World Summit onSustainable Development (WSSD) in Johannesburg, August 2002, represented a major breakthrough, as itput the issue of renewable energy sources (RES) on countries political agendas.

In terms of sustainable energies, the Johannesburg meeting generated a series of national,regional and worldwide initiatives with different plans and interests, but all with the same objective: tosubstantially increase renewable sources participation and contribution to energy supply. The initiativesgenerated at this meeting include:

1. Johannesburg Renewable Energy Coalition (JREC)

Led by the European Union, in March 2003 this initiative already had the formal support of 78 countries(among them: Chile, Argentina, Brazil and the countries of the Caribbean). The JREC has not establishedspecific targets, but is currently completing preparation of its definitive Plan of Action.

The JREC Declaration states that its members are committed to cooperating on the furtherdevelopment and promotion of renewable energy technologies on the basis of clear and ambitious timebound targets set at the national, regional and hopefully at the global level. We have adopted, or willadopt, such targets for the increase of renewable energy and we encourage others to do likewise. 2 It alsoexpresses the need to report on progress and results in time for the World Conference on RenewableEnergies, Bonn 2004.

2. Renewable Energy & Energy Efficiency Partnership (REEEP)

Led by the United Kingdom and proposed in Johannesburg on the occasion of the WWSD, mentioned

above, by July 2003, this initiative had organized nine regional meetings of experts in Central Europe,Southeast Asian, Central Asia, East Asia, Western Africa, Eastern and South Africa, North America andfinally Latin America. REEEPs official launching took place in London, in October 2003.

REEEPs Plan of Action states that this is a coalition of progressive governments, businessesand organisations committed to accelerating the development of renewable and energy efficiency systems(REES). It formed to advise those who are developing energy policies and the business sector on how to

2 From the official JREC website: www.jrec.org.


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provide innovative policies, regulatory and financial mechanisms to accelerate the development ofsustainable energy. The process of forming this association will also assist the German proposal for theWorld Conference on Renewable Energies, to take place in Bonn, June 2004.3

3. World Renewable Energy Conference, 2004

The main priorities of this World Conference, organized by the Government of Germany, are to highlightthe important role of renewable energy in the context of sustainable development, to bring attention to theconcept of establishing national, regional and global shares of renewable energy, and to achieve aninternational agreement on a Global Plan of Action for the successful implementation of renewableenergies.

Reading these different declarations reveals two main principles shared by these initiatives:

(a) The joint definition of concrete numerical targets for renewables share of countrys energy

matrixes;(b) The establishment of a target deadline (June 2004, the world meeting in Bonn) as the

culminating moment for the presentation of concrete actions in this sense.

B. INTERGOVERNMENTAL INITIATIVES

1. European Union

(a) Directive 2001/77/EC

On 4 July 2001, the European Parliament approved this Directive on the promotion of electricityproduced from renewable energy sources in the internal electricity market. The Directive is intended tocontribute to compliance with Kyoto commitments and achieving the goal of doubling renewableenergys share of the European Unions gross national energy consumption, from its current level of 6%to 12% in 2010.

With this new regulation, the member states committed themselves to respecting nationalobjectives for future consumption of electricity produced using renewable energy sources and to create agreen tag guarantee system. Similarly, States must adopt parallel measures that create equitableconditions and make it easier for renewable energy sources to enter the European market, at the same timeas they respect the rules of competition.

(b) Intelligent Energy Europe (EIE)

More recently, in May 2003, the European Parliament approved a multi-year communityprogramme called Intelligent Energy Europe, with a 200 million budget, 80 million of which will go topromoting renewable energy sources in the countries of the Union and 17 million to cooperation withdeveloping countries to develop energy efficiency and renewables. The programme includes and replacesthree old programmes: SAVE, Altener and COOPENER.

3 From the official REEEP website, at http://www.reeep.org.


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(c) Directive 2003/87/EC

On 13 October 2003, European Directive 2003/87/EC on greenhouse gas (GHG) emissions allowancetrading was published in the Official Journal of the European Union, thus making the Directive EU law.

According to that Directive, member states must decide on the amount of GHG emissionallowances (EUAs) to be allocated for 2005-2007 to large fixed sources of CO 2 by March 2004 (a secondphase is scheduled for 2008-2012.) More than 12,000 fixed sources, representing about 45% of the EU25total GHG emissions, will be covered.4

(d) Draft Directive 2003/0173

In addition to the above mentioned EU Directive on greenhouse gas emission allowance tradingwithin the Community, a linking directive will eventually govern the relationships between the EuropeanTrading Scheme (EU-ETS) and the Kyoto Protocol. In its current form (it had yet to be approved by theEuropean Council and by the European Parliament at time of writing), it allows for the import of

Emission Reduction Units (ERUs) and Certified Emission Reductions (CERs) into the ETS (throughconversion in EUA), though only after 2008.

On 16 March 2004, the European Parliaments Environment Committee adopted its report on theDirective to link the EU emissions trading scheme to the Kyoto Protocol project-based mechanisms. Thevote marked another step toward turning the linking Directive proposal into law. The report sets out theParliaments position and will be passed along to the EU Environment Council. The two bodies must agreeon all outstanding issues in the coming weeks if they are to meet their 20-23 April target date for adoption.

Following the 16 March vote, both bodies seemed to agree that the link should not depend onratification of the Kyoto Protocol. They also agreed that the link should start on 1 January 2005 for CleanDevelopment Mechanism (CDM) projects and 2008 for Joint Implementation (JI) projects. Many analysts

actually refer to this Directive as the EuroKyoto, meaning that a wide range of trading opportunitieswill be offered soon to countries identified as Non-Annex 1 (as is the case with Latin Americancountries) in the Kyoto Protocol.

In preparation for the EU-ETS, several companies have engaged in demonstration trades of EUA.Because EUAs have not yet been allocated to any private entities, all transactions at time of writing havebeen forward trades in which EUAs will be transferred from the seller to the buyer at a future date.

Some 20 deals took place in the first three quarters of 2003, for a volume probably superior to500,000 tons of CO2e (carbon dioxide equivalent). Most of these deals are small (below 50,000 tons), andinvolve only vintages from 2005, 2006 and/or 2007.

Although price information is sketchy, transaction prices have apparently increased from around6/tCO2e in May 2003 to 12/tCO2e in November 2003. These prices, however, do not necessarily reflectthe long-term equilibrium between supply and demand, since the market is still so thin, and there is stillso much uncertainty about the final allowance allocations.

4 EU25 refers to the current 15 EU member countries plus the 10 countries that will join Europe in 2004.


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2. International Energy Agency (IEA)

In their official news release (2001), the Ministers of the OECD countries declared that We intend thatrenewable energy should play an increasing role.5

Within the International Energy Agency, the body responsible for this specific area is theRenewable Energy Working Party (REWP), which in preparing World Energy Outlook 2000, hasproposed some basic guidelines to rapidly increase renewable sources in the Total Primary Energy Supply(TPES).

A recent IEAs document is one entitled Renewable Energy... Into the Mainstream(October 2002), prepared by the Agencys Renewables Unit. The document deepens the discussionof the five basic steps to increase renewable use:

(a) Speed up technological development(b) Reinforce national policies

(c) Reduce market barriers and start-up manufacturing costs(d) Mobilize investment based on market mechanisms(e) Promote international cooperation

C. REGIONAL INITIATIVES: THE CASE OF LATIN AMERICA AND THE CARIBBEAN

1. Latin American and Caribbean Initiative for Sustainable Development (ILACDS)

This initiative was presented to and approved by the first special meeting of the Forum of Ministers of theEnvironment of Latin America and the Caribbean, in Johannesburg (August 2002). Among others, one of

its most ambitious goals is to increase renewable sources share of national and regional energy matrixesby 2010, bringing renewables share to 10% of Total Primary Energy Supply (TPES).

The ILACDS declaration calls for it to work to ensure that developed countries meet theircommitment of assigning 0.7% of GDP to official development aid, promote the implementation of theKyoto Protocol, strengthen or correct sustainability indicator systems, develop South-South cooperationactions, and, among other guiding targets, increase the regions use of renewable energy to 10% of totalenergy by 2010.6

2. Brasilia Platform

The regional follow-up meeting to the WSSD, organized by the Government of Brazil in Brasilia,29-30 October 2003, brought together representatives of Ministries of the Environment and Energy ofLatin America and the Caribbean.7

5 Meeting of IEA Governing Board at Ministerial LevelCommuniqu. At http://library.iea.org/dbtw-wpd/Textbase/press/pressdetail.asp?PRESS_REL_ID=35.

6 First special meeting of the Forum of Ministers of the Environment of Latin America and the Caribbean.Distribution UNEP/LAC-SMIG.I/2. August 2002. Regional Office for Latin America of the United NationsEnvironmental Programme (UNEP), at http://www.rolac.unep.mx/ilc_esp.pdf.

7 As follow-up to the Latin American and Caribbean Initiative for Sustainable Development, ILACDS.


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The purpose of the Brasilia event was to create an opportunity to bring together initiatives andfocus discussion on the problems and opportunities specific to the countries of Latin America, to define acommon regional position before the Bonn meeting.

As the event ended, government representatives from 21 of the regions countries approved the

Brasilia Platform, whose main commitments are summaries in box I.1.

Box I.1THE BRASILIA PLATFORMS MAIN COMMITMENTS

To further efforts to achieve the goal set forth in the Latin American and Caribbean Initiative for Sustainable Development ofensuring that by the year 2010 the use of renewable energy by the region, taken as a whole, amounts to at least 10% of itstotal energy consumption on the basis of voluntary efforts and taking into account the diversity of national situations. Thispercentage may be increased by those countries or subregions that voluntarily wish to do so;

To strengthen cooperation between the countries of the region and the developed countries in promoting economic growth,environmental protection and social...;

To foster the formulation of the long-term public policies needed to further the development of renewable energy sources, in

accordance with the regulatory frameworks in place in each country...;

To promote, at the level of each country, cooperation with the production sector in order to form alliances and gain more in-depth knowledge of the renewable energy sector;

To foster the adoption of regulatory and institutional frameworks that incorporate instruments which internalize the social andenvironmental benefits of renewable energy;

To facilitate the training of human resources for, inter alia, the diffusion of technology...;

To undertake, with the support of the Economic Commission and other international agencies, an exchange of experiencesregarding applicable regulatory frameworks for the development of renewable energy sources with a view to the followingobjectives:

(a) Development of a comparative table on regulatory frameworks in the region;(b) Formulation of proposals for strengthening the sustainability of existing regulatory frameworks, in accordance with thesituation in each country, and for promoting greater energy efficiency;

To express strong support at the International Conference for Renewable Energies, to be held in Bonn, Germany, in 2004, forthe creation of a technical and financial cooperation fund to permit the reduction of existing costs and to increaseinvestment;

To urge financial institutions to finance national, subregional and regional renewable energy projects...;

To encourage the development of renewable energy projects and the creation of markets for green tags and carbon emissioncredits and the execution of tax incentive programmes...;

To formulate public policies that encourage the development of renewable energy markets; To take into account the social needs of the lowest-income sectors in the countries of the region when developing renewable

energy markets;

To request the Executive Secretary of the Economic Commission for Latin America and the Caribbean to prepare a documenton the status of renewable energy in Latin America and the Caribbean for presentation at the International Conference forRenewable Energies and to provide support to the countries of the region at the International Conference and in the follow-up and implementation of the agreements reached at that event, including the convening of a regional follow-up conferencewithin the framework of the United Nations;

To declare that this platform for action constitutes a Latin American and Caribbean contribution to the InternationalConference for Renewable Energies and to instruct the Chairperson to present it at that Conference.


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The Brasilia event made it possible to jointly and synergically discuss the opportunities andbenefits available to the Region in the framework of the different world future scenarios in favour ofrenewables, whether Kyoto is ratified or not.

Although in this document governments make no specific political-institutional commitment, thePlatform has nonetheless been an important step for the regions countries, since it represents the firstconcrete effort to coordinate and make consistent Latin American countries different focuses andinterests in terms of sustainable renewable energy.

In fact, Brasilia has represented an important opportunity to concentrate and consolidate theregional discussion agenda on renewable sources and to guide it toward initiatives that include designinga joint Latin American proposal, to position Latin America strategically in terms of the different futurescenarios for the development of renewable sources and the world carbon market.

According to the specific requirement contained in the Platform, ECLAC is the regionalinstitution in charge of follow-up and implementation of its agreements, including the invitation, within

the framework of the UN, of a regional conference to follow-up on the World Conference in Bonn (seebox I.1).

3. Declaration of the Latin American Parliament

The parliamentarian delegations from 10 of the regions countries, attending the seventeenth meeting ofthe Energy and Mining Commission of the Latin American Parliament (Parlatino), held in Santiago Chilein late April 2004 at ECLAC headquarters, agreed on the following points, among others:

Promote judicial-regulatory frameworks that encourage not only the growth and greatercompetitiveness of markets, but also the efficient use of the natural resources involved, the

protection of societies heritage as an integral whole, the rights of users and consumers, andharmonic and economically rewarding relationships for local communities involved inresource exploitation.

To encourage a broad debate to improve energy sector regulation, considering among others: (i)the goals of sustainable development; (ii) the ongoing effectiveness of genuinely competitivemarkets; (iii) prices that reflect externalities; (iv) supply security; etc.

Improve judicial and regulatory norms according to each countrys reality, to guarantee therights of users and to ensure that more renewable energy sources and improved energyefficiency lead to an increase in the competitiveness of our economies.

To jointly foster with parliamentarians and countries belonging to the European Union anextensive cooperation programme to harmonize legislative practices favourable to protectingthe environment.

To promote draft laws that favour sustainable development of the energy sector throughlegislative initiatives on renewable sources and efficient energy use.


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To foster Europe-Latin American Parliamentarian dialogues through the Commission ofMining and Energy of the Latin American Parliament and the Committee on Industry,External Trade, Research and Energy of the European Parliament, to promote thedevelopment of sustainable energy.

Like the Brasilia Platform, the Declaration of Santiago, while a document with no specificpolitical-institutional commitment on the part of national congresses, nonetheless became a significantstep for the regions countries, since it is the first effort to coordinate Latin American parliamentarians interms of sustainable renewable energy.


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Chapter II

THE CURRENT STATE OF RENEWABLES IN THE REGION

The grouping of countries into the subregions considered in this paper reflects the information available(as established by the Latin American Energy Organization (OLADE) Energy Economic InformationSystem, SIEE) and their geo-economic proximity. Thus, the following subregions have been defined:

Central America: Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama Caribbean 1: Suriname , Guyana, Barbados, Trinidad & Tobago, Jamaica, Grenada Caribbean 2: Haiti, Cuba, Dominican Republic Andean Community: Venezuela, Colombia, Ecuador, Peru, Bolivia Expanded MERCOSUR: Brazil, Argentina, Paraguay, Uruguay + Chile

Moreover, given the size and specific characteristics of their energy systems, Mexico and Brazilwill be analysed separately on some occasions.

In the case of the Caribbean subregion, two aspects were considered: (a) all the countriesanalysed provide information to OLADEs SIEE, thus guaranteeing that comparable information hasreceived a similar treatment; and (b) the Caribbean has been separated into two units for analysis(Caribbean 1 and 2) given the differences in the availability of natural resources and in thesocio-economic conditions.

A. THE INSTITUTIONAL FRAMEWORKS GOVERNING RENEWABLE ENERGIES

Generally speaking, the agency responsible for renewable energy sources should come under theinstitution in charge of the energy sector, which in different countries may be dealt with by a Ministry,Secretariat or Commission. However, given the multisectoral nature and extent of the issue, in the case ofalmost all renewable technologies, other state, non-governmental and private instances can be identifiedthat are directly or indirectly handling renewable energy sources (RES), mainly those involved inmanaging biomass and water resources, whose perspectives or primary lines of action are not energy.

Several agencies participate on behalf of the public sector. At their upper levels these involve theinstitutions responsible for a countrys energy policy, depending on the degree of participation establishedin their central mandate with regard to RES. Similarly, environmental ministries, secretariats orauthorities also participate, as they must ensure the sustainable use of the countrys natural resources(mainly forestry and hydro) and moreover constitute the country level counterpart involved in

international protocols and conventions on climate change, and therefore are responsible for monitoringprogress on greenhouse gas reduction commitments.

Of the specific subsectors, the most significant are forestry, hydro and electricity. In the case ofthe first, the forestry authorities have a mandate to ensure the conservation and sustainable use of forests.Generally these institutions have close ties with environmental authorities, but their links to energyauthorities are less solid. Forestry authorities have worked mainly on some specific aspects of this


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resource, quantifying the production of fuelwood, while the ministries in charge of the energy sectorfocus their efforts on preparing statistics on consumption and developing measures to reduce it.

In most of the subregions countries, both the national forestry agency and the ministry

responsible for the energy deal with the issue of fuelwood, but not necessarily through close cooperation.The laws governing the bodies responsible for forests usually do not refer specifically to fuelwood, whichis treated as a subproduct of logging activities.

Institutions in charge of water resources usually handle hydroenergy, but these are generally notvery developed, focus more on the subsector, and are more interested in issues related to humanconsumption and the quality of public water utilities, with the participation of several ministries,municipal governments and other bodies. Many laws include the concept of integrated basin management,but institutionalizing basin management is still in its early stages.

The third subsector is very important due to the participation of hydroelectric power (and to alesser degree geothermal energy and wind power) in countries electric power supply. Thus, even in cases

where the electrical industry has been liberalized, public electrical utilities remain very important. In thissubsector it is also necessary to refer to regulatory bodies, which generally must grant permits, licensesand /or concessions for RES use.

In the case of the private sector, the main agents are the companies involved in developing andrunning electric generation projects with renewable energies. In several countries these firms have cometogether to represent their collective interests. In these cases, there are at least three categories that shouldbe recognized, depending on their current or projected installed capacity: small, medium-sized and largefirms.

The first belong to local investors and face the most difficulties and barriers to developing theirprojects. Depending on their location and their closeness to electric distribution grids, they consist of two

sub-groups: those connected to the grid and those dedicated to isolated systems and communities. Thesecond group (generally with installed capacities ranging from 10 to 50 MW) is also associated with localinvestors, but larger ones, with access to international capital (in some cases through joint ventures withregional corporations) and easier access to national and even international electricity markets. The thirdgroup includes the large hydroelectric companies.8

It is important to mention the NGOs, generally associated with development processes, whichhave in some cases proposed and developed energization projects using RES, in isolated communities.Some NGOs and firms deserve special mention for their dedication to the sustainable use of fuelwood,promoting energy efficient stoves (Guatemala) and in some cases conducting their own research todevelop unique prototypes, some already being sold in the region. Thus cooperatives, rural communityorganizations and the isolated rural population without electric coverage, with limited capacity to pay, and

difficulties obtaining financing can nonetheless play an important role.

Another very important group of players are the workshops, equipment suppliers, installers,maintenance people and local technical bodies that must be trained and encouraged to provide solid,reliable service, essential if the use of renewable sources is to meet its objectives.

8 This is the case of a privatized firm, present only in Panama, but supported by multinational corporations.


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Research centres and universities, which aside from training human resources are important tomonitoring, evaluating and analysing projects, also contribute to adjusting and developing appropriatetechnologies. In every country there are research groups working on renewable energies, dealing withconstant financial difficulties, but often developing work of high academic quality and with good

potential for application.

Brazil is the regions country with the most renewable energy research reference centres; thesetake advantage of governmental support but also develop projects for the private sector. They include:

CBEE - Brazilian Center for Wind Energy at the Federal University of Pernambuco

CENBIO - National Reference Center for Biomass at the University of So Paulo

CENEH - National Reference Center for Hydrogen at the University of Campinas

CERPCH - Reference Center for Small Hydropower at the Itajub Federal Engineering

School

CRESESB - Reference Center for Solar and Wind Energy at the Electric Energy ResearchCenter, CEPEL

GREEN SOLAR - Brazilian Center for the Development of Thermo-Solar Energy at theCatholic University of Minas Gerais, PUC-MG

CERBIO - Reference Center for Biofuels at Paran Institute of Technology, TECPAR

NAPER - Support Center for Renewable Energy Projects at the Federal University ofPernambuco, UFPE

GEDAE - Development of Alternative Energies Studies Group at the Federal University ofPar, UFPA

Multilateral and international cooperation agencies, present in most renewable energy projects,are significant players given the role played by their expertise, economic aid for evaluating naturalresources and project financing, often associated with equipment sales.

In the Caribbean, for example, many international players are developing energy projects,programmes and initiatives, currently underway or planned for the near future (see table II.1). They aimto improve the competitiveness of renewable energies and increase energy efficiency.

Nonetheless, the presence of so many similar programmes in a small territory, such as the WestIndies for example, often with overlapping issues and locations, should give rise to international concernand an effort to ensure better coordination, in order to achieve more efficient cooperation and morevisible, synergetic results.


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Table II.1ENERGY PROGRAMMES/ONGOING PROJECTS IN THE CARIBBEAN

(Status, as per 3/2004)

International donororganizations

National/ regionalcounterparts

Name ofprogramme

Description Remarks/ stage

GEF/UNDP Guyana

CARICOM CREDP/UNDP Barrier removal for REprojects in the Caribbean

extended PDFB Stage

BMZ/GTZ Germany CARICOM CREDP/GTZ Barrier removal for REprojects in the Caribbean(Parallel project toCREDP/UNDP inselected CaribbeanCountries)

projectagreement stillpending,Implementationstage

OAS/ClimateInstit./Winrock(GSEII)

Governments ofSaint Lucia, SVG,Dominica

GSEII Development ofSustainable EnergyPolicy in selectedCountries

Implementation

World Bank/ ESMAP OESC Secretariat,St. Lucia, NRMU

ESMAP SectorStudy: SectorDevelopment inSmall Islands

Application/negotiation stage

European Union Regional EUDelegations and NAOof CaribbeanCountries

Energy Initiative forPoverty Eradicationand SustainableDevelopment

Financing of studies,analysis, projectpreparation, applications,workshops

Preparatoryphase

USAID CAST Energy Efficiencyin the TourismSector

GEF/UNDP OLADE/CEIS Energy EfficiencyProject

PDF B Stadium

EU/ Insula Ministry of PhysicalPlanning, Saint Lucia

EURO-CARIBBEANForum RES

Export Promotionprogramme for EuropeanEnergy Sector

Kick-offConference inSaint Lucia inMay 2002

Governments. France,UK, USA, Japan, andCanada

CARICOM Sustainable Energyfor SustainableDevelopment in theCaribbean

Main objectives of thePartnership/Initiative: -Accelerate the transferand adoption renewableenergy- Implementing pilotenergy efficiency projects- Build capacity for thetraining of energy sector

professionalsBMZ/GTZ CARILECCAST

working title:Sustainable use ofEnergy in theTourism Sector(Energy Efficiencyin the Caribbean)

energy efficiency inHotels, efficient watersupply, water recycling,solar water heatingAlso: EE in Industry andCommerce

preparatory phaseDesk Studyinitiated inSeptember 2003,final date: middleof November2003


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B. CARIBBEAN 1

1. General and policy aspects

The countries in the Caribbean are heavily dependent on fossil fuels. More than 97% of the regionscommercial energy consumption is based on oil products. Aside from Trinidad and Tobago, which is a netexporter of oil products, and Barbados, which partly covers its own oil and natural gas requirements, noother country has significant proven fossil fuel resources.

Electric power generation is provided mostly by medium- and high-speed diesel generators ofdifferent sizes. Jamaica is the only country with coal-fired power plants and a few countries use hydropower plants or biomass from sugar cane to generate some electricity.

The main characteristics common to these Caribbean countries and energy are:

They have small-scale economies and small energy markets; They are mainly isolated islands (except Guyana and Suriname); They have relative high GDPs (e.g., Trinidad, Barbados, Grenada); They have extensive electric power coverage, up to 99% (except Guyana and Suriname); Longstanding private electrical utility monopolies handle generation, transmission,

distribution; They are extremely dependent on oil imports (except TT); Their electric power supply system is very centralized with no isolated systems (except

Guyana and Suriname); They have readily available, but mainly untapped renewable energy potential, mainly wind

power, hydropower and solar-thermal energy.

Because most of the affected countries are net importers of oil products, their balance of trade anddomestic economies are highly vulnerable to fluctuations in the international oil market. Moreover, thehigh proportion of oil products used to produce electricity makes production costs high and brings with itrelatively high levels of local and global environmental degradation. As a result, for each kilowatt-hour ofenergy produced, carbon dioxide emissions are about 30% to 40 % more than levels in Western Europe.

The main challenges confronting the energy sector in the Caribbean are therefore:

energy security; economic growth; and sustainable development

Many Caribbean countries spend up to 50% of their export earnings, including revenues fromtourism, to import oil products. Moreover, given the location of the Caribbean islands, the region will alsobe heavily affected by the consequences of global climate change, particularly rising sea levels and theincreased danger of hurricanes.

The utilization of renewable energies (RE) addresses these issues and other key aspects ofsustainable energy, specifically energy efficiency and energy conservation. Nevertheless, despite the


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regions sizeable renewable energy resources (e.g., wind and solar energy, hydropower and biomass) andinvestors interest, just 2% of these resources contribute to energy supply.

In the past, regional and international private investors have often offered to invest in attractive

RE projects in the English Caribbean countries, such as wind parks, hydropower schemes or geothermalenergy power plants. However, these initiatives were turned down due to restrictive energy legislation notallowing for independent power producers.

The energy policy pursued most widely by Caribbean governments in recent years has been theprivatization of formerly state-owned electrical utilities. Among other reasons, privatization responds tobudgetary pressures, the need to improve efficiency, and a desire to attract private capital. Usually,privatization has brought restructuring and cost reductions and reduced government subsidies to theenergy sector. It was also expected to increase competition.

The status of privatization varies from country to country: from being an integrated department ofthe ministry (Saint Kitts) without a separate budget to fully privatized utilities, in which the government is

a minority shareholder. Each country has its own rules regarding sales and privatization, but normallyelectrical tariffs cover the full costs of generation.

The general tariff rate ranges from around 15 cents/kWh (US$) in Barbados, Jamaica and Guyanato nearly 30 cents/kWh in Antigua. The exception is Trinidad & Tobago, which thanks to its ownresources still enjoys the regions lowest electrical rates.

In countries where utilities have been privatized, such as Grenada, Santa Lucia or Dominica, thegovernments have agreed on a guaranteed fixed return on the utilitys assets as the basis for theiroperation. Often governments have also permitted an electrical law with its respective regulation, grantingsole rights to the utility to generate and distribute electricity.

This creates a very comfortable situation for companies. The Saint Lucia utility, for example,enjoys a minimum 15% return on assets guaranteed by the government until 2045 through tariffadjustments. In Guyana, the guaranteed return on assets is 23% and the government also guarantees thecompany currently managing the utility payment of the utilitys debts.

This situation is typical among most Caribbean countries and has led to several initiativesfinanced by international donors.

In recent years, the general conditions surrounding the use of renewable energies have changed. Theheavy economic burden of gasoline imports, political dependency, and renewable energy sources enormousuntapped potential, combined with falling investment costs for RE projects, have made governments and,increasingly, electrical utilities, more inclined to consider using renewable energy sources.

2. Baseline conditions

The potential for renewable energy throughout the Caribbean region is vast and includes all the classicRE technologies, old (hydropower) and new (wind, solar, biomass, geothermal energy). Organizedaccording to their potential impact on electric power generation in the near future, these are wind power,micro- and mini-hydropower systems (MHP), biomass (including bagasse, rice husks, wood wasteproducts and landfill gas) and solar energy (photovoltaic systems for remote rural sites).


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There are also important opportunities for the use of solar thermal energy, namely solar waterheating systems (SWH). In addition, in the medium to long run the use of geothermal energy mayconstitute an opportunity.

(a) Wind Power

The largest wind power facility on a Caribbean island to date is on Curacao, where a 3 MW windfarm was installed by the KODELA utility company in 1993. A new 9 MW wind farm was commissionedin mid-2000 and is run by a private firm. Other wind turbines providing energy to the grid operate inGuadeloupe. A number of Caribbean islands such as Barbados, Antigua and Montserrat had someindividual wind turbines installed in the 1980s, but most are no longer working.

In May 2004 a 20 MW wind farm will be commissioned in Jamaica. This will be the largest windfarm in the Caribbean and a step toward the larger scale use of wind power in the Caribbean. Presently,the following countries are either planning wind farms or researching their feasibility for their territory:Barbados, Dominica, Grenada, Guyana, Jamaica, Saint Lucia, Saint Vincent and the Grenadines.

(b) Hydroenergy

In the Caribbean, hydropower is used in Guyana (0.5 MW), Suriname (189 MW), Belize(25.2 MW), Dominica (7.6 MW), Saint Vincent (5.6 MW), Cuba (56.2 MW) and Jamaica (23.8 MW).

In Suriname and Guyana big hydropower potential in the range of thousands of MW exists. InJamaica, a potential hydropower site of about 50 MW has been identified and some run-of-the-riverschemes add up to 6 MW. On some smaller islands, such as Dominica and Saint Vincent, somerun-of-the-river schemes already exist and their increased use is under consideration.

(c) Biomass

Biomass sources in the Caribbean include:

agricultural by-products e.g., bagasse and sugar cane tops; agro-industrial waste, e.g., vinasse (dunder) from the sugar industry; aquatic biomass e.g., spirulina, water hyacinth; wood and woody materials, including wood chips from the lumber industry; landfill gas from closed waste disposals.

Barbados, Saint Lucia and Jamaica have made requests for landfill gas projects. A commonexample of biomass conversion into electricity in some Caribbean countries is the burning of bagasse(sugar cane residue) in a conventional steam boiler plant.

As a matter of fact, bagasse is an important biomass fuel in the Caribbean. Sugar factories in allCaribbean countries use bagasse as a heat source for raising steam; mostly they burn it inefficiently toavoid accumulating too much waste. Most Caribbean sugar factories also produce electricity from bagassefor their own needs, but only a few (Cuba and Puerto Rico) can feed electricity to the grid because ofcontractual and operational difficulties in selling power only during the one-crop per year growingseason. About 5.7% of the electricity produced in Jamaica comes from bagasse. This could be increased ifthe sugar cane industry had two crops per year.


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(d) Photovoltaic

Photovoltaic (PV) applications in the Caribbean are primarily for security lighting and stand-alone systems in areas far from the grid. PV has developed a market niche in telecommunications,

signalling, leisure, water pumping and stand-alone rural electrification. In the Caribbean, stand-alone PVsystems assist social and economic development in some remote areas, such as rural areas in Guyana andSuriname.

(e) Solar water heaters

The most frequent use of this technology in the Caribbean is as solar water heaters (SWH) fordomestic and industrial use, in hotels and hospitals. SWH are cost effective in the areas with highexposure to sunlight in the Caribbean and have enjoyed significant success in countries such as Barbadosand Saint Lucia. In Barbados, growth was driven by fiscal incentives. Nevertheless, there is stillenormous potential for SWH application on other islands and particularly in the hotel and tourism sector.

(f) Geothermal energy

Geothermal energy resources can be found in areas of high volcanic activity in many parts of theworld. Geothermal energy resources may be categorized as hydrothermal, geopressured, hot dry rock andmagma. Presently all commercial operations are based on hydrothermal systems where wells are about2,000 meters deep, with reservoir temperatures ranging from 180o to 270oC.

Geothermal energy resources are used to generate power in Guadeloupe. Some Caribbean islandssuch as Saint Lucia, Dominica, and Montserrat have considerable potential. A major drawback to thedevelopment of geothermal energy resources, however, is capital. Companies in developing countries areusually not large or diversified enough to assume the high investment risks and the high upfront costsassociated with geothermal energy exploration.

The magnitude of technical and financial assistance required to develop the regions geothermalenergy potential goes far beyond the capabilities of a technical assistance project. Therefore support ofgeothermal energy as well as larger hydropower schemes will not be considered within the current projectdesign.

C. CARIBBEAN 2


Given the availability of information, in the case of this subregion it was only possible to analyse thecases of Cuba and the Dominican Republic. Table II.2 summarizes the main laws making up theregulatory framework governing RES in these two countries.


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(a) Cuba

No specific law governs new and renewable sources in the Republic of Cuba. However, in May1993, the Executive Committee of the Council of Ministers approved a Programme for Developing

Domestic Energy Sources (Programa de Desarrollo de las Fuentes Nacionales de Energa), prepared bythe then National Energy Commission, after a lengthy consultation process at the national level. In June ofthe same year, the National Assembly invited all of the countrys institutions and the population toparticipate in improving and implementing this programme. It included developing all domestic energysources, but gave priority to biomass from sugar cane in a first stage, and left other renewable sources, suchas hydroenergy, fuelwood, coal, solar and wind power, in a second stage.

Table II.2

Scope of the law Cuba Dominican Republica

Energy --Environment Law 81 governing the environment, July

1997General Law on the Environment andNatural Resources No. 64-00

Forestry The forestry law (Law #85, 31 August1998)

General Law on the Environment andNatural Resources No. 64-00

Water General Law on the Environment andNatural Resources No. 64-00

Public utilities General Law on Electricity No. 15-01Electricity General Law on Electricity No. 125-01RES Programme to Develop Domestic Energy

Sources (1993)Law 112-00

Specific to any RES N/a N/aa The regulations accompanying these laws are not included. Nor are regulations referring to electric power market operations

that function in the Dominican Republic.

Later, in October 2002, the Executive Secretariat of the Council of Ministers ordered the creationof the Renewable Energies Front (Frente de Energas Renovables), a state agency specializing incoordinating and supervising the different State bodies involved in the issue. Its objectives are: to providethe country with an instrument that supports, promotes and proposes to the government policy on RESuse, gives priority to their use and favours the cohesion and integration of the different institutions andministries most involved and most influential in this strategic activity.

Environmental Law No. 81 was approved in 1997, and lists the instruments committed to

applying Cubas environmental policy, including: the National Environmental Strategy, the NationalEnvironmental and Development Programme, the Economic and Social Development Plan. Moreover, itcreated the National Environmental Fund (Fondo Nacional de Medio Ambiente), to fully or partiallyfinance projects and activities that aim to protect nature and ensure its rational use.

For forestry resources, in August 1998 Law No. 85 was approved, establishing general principlesand regulations on protecting, increasing and sustainably developing the countrys forestry heritage, andpromoting the rational use of non-wood forestry products. It assigned the ministries of Agriculture,Science, Technology and the Environment, and the Interior, with different forest-related functions.


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Meanwhile, the Foreign Investment Law, approved in September 1995, approves fiscal exemptions for allforeign investment, including energy, and therefore sugar cane biomass and other renewable energy sources.

(b) Dominican Republic

The constitution of the Dominican Republic makes no specific references to natural resources orenergy. Law 112-00, however, specifically refers to a tax on fossil fuel and oil derivative consumption,and creates a special fund to encourage RES programmes and an energy saving programme. According tothis law, the fund will consist of two percent of income received as part of the application of this law,rising annually by one percent to reach a total of five percent of these revenues.

2.Baseline conditions

(a) Cuba

(i) Fuelwood

With regard to fuelwood and the loss of forested areas, Cuba was the only country postingfavourable trends, with reforestation amounting to 1.3% from 1990 to 2000. The country has potential forusing bagasse and agricultural sugarcane wastes to produce 9,500 GWh annually. In terms of electricityfrom wind, 23 locations in the north have the potential to produce an estimated 1,300 GWh. This is thesame as the amount of potential energy that could be produced using hydro. For biogas, the potential is0.18 million tons of oil equivalent (toeb). Finally, considering the sustainable use of fuelwood, potential isestimated at 3.5 mn m3 annually (0.5 mn toeb).

(ii) Hydroenergy

Cuba has 175 hydroelectric power plants with a total capacity of 54.7 MW, which generate 90 GWh.

(iii) Wind and solar energy

On wind, 6767 windmills exist to pump water, which replaced almost 10,000 toeb in 2002.Similarly, three facilities exist to produce electricity using wind, with a capacity of 0.46 MW. This countryalso has 7000 photovoltaic systems up and running, with a capacity of 1.5 MW, including 350 medicaloffices, 5 rural hospitals, 2364 primary schools, 1864 rural television rooms, 150 social circles. Finally,more than 1800 facilities for heating water using solar energy and 50 using biogas are reported.

The Cuban governments plans establish the goal of extending electrification to 100% of thepopulation over the next five years, using new and renewable sources.

(b) The Dominican Republic

(i) Biomass

Forests cover 28.9% of the countrys total surface area. No figures are available on changes in theforested surface area. Meanwhile, this countrys biomass potential has been estimated for different sources.For biomass from sugar cane, this reaches 575 GWh/year; for organic wastes, 1,644 Tera Joules (TJ) of


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residual energy in rice husks and 1.6 tons per day of manure from cows and pigs; and for urban waste, morethan 3 500 tons of garbage per day for the cities of Santo Domingo and Santiago de los Caballeros. In termsof fuelwood biomass, local production of fuelwood and charcoal is estimated to reach 1.8 million metrictons per year, in the context of an industry considered informal.

(ii) Hydroenergy

Although the country is thought to have made substantial progress in terms of making the most oflarge-scale hydroelectric potential, its mini-hydro potential has not been completely identified and has notbeen used much. According to information gathered, the most significant contribution from RES comesfrom conventional hydro sources, with installed generating capacity standing at 452 MW, while for mini-plants the aggregate capacity is 0.93 MW.

(iii)Wind power

The potential for wind power use in the Dominican Republic has been estimated at more than

10,000 MW, mostly located on the northern (oriented toward the north-east) and the south-eastern (orientedtoward the south-east) coasts. There are almost 30 small facilities that use wind power. Finally there is aregistry of a relatively small number (no more than 80) photovoltaic solar facilities for community andprivate use. Of these, 29 are used in computer laboratories in the countrys border regions.

In the Dominican Republic there are several projects using the RES analysed here. Most outstandingis a set of eight wind power projects, with capacities ranging from 2 to 100 MW, which altogether total morethan 300 MW, and concessions in place already for half thiscapacity.9 A project for producing 83.4 GWh usingsugar cane bagasse has also been reported. At the same time, 41 drinking water pumping systems that usephotovoltaic systems are planned for border military posts.10

D.CENTRAL AMERICA


Central America is one of the few Latin American subregions to have regulations regarding the developmentof RES at both national and subregional levels. Table II.3 provides a list of treaties, conventions andsubregional institutions in this sense, summarizing the main initiatives in this area involving Central AmericanCountries, which form part of the Central American Integration System (SICA).

9 Draft Estudio Bsico sobre Potenciales, Proyectos y Actores en el rea de Energas Renovables de laRepblica Dominicana (Basic study on potencial, projects and players in the renewable energy area in theDominican Republic), prepared by the German Technical Cooperation (GTZ) for the State Ministry ofManufacturing and Commerce, December 2003.

10 Energas Renovables en Accin magazine. October 2003. Published by the Ministry of Manufacturing andCommerce.


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In terms of national laws and upper level administration, legislation and the regulatory frameworkaffecting renewable energy sources (RES) is general and focuses on conserving, protecting andsustainably using countries natural resources, principles that are dealt with in their respectiveconstitutions and environmental laws.

Direct references or mandates concerning RES, in general or in terms of specific sources are foundin laws creating ministries, secretariats or energy commissions and in laws governing the electrical industry.These last include not only electricity laws, but also statutes governing regulatory bodies, laws concerningelectrification institutions and in some cases special laws for promoting RES in general or some resource inparticular (for example, encouraging hydro- and geothermal energy use).

Likewise, laws regarding the electrical industry are directed at transforming RES into electricpower, to be sold through interconnected grids or to function as stand-alone systems. Similarly, ownconsumption and where appropriate the sale of surpluses to third parties through electrical distributiongrids are also considered.

Fuelwood and water are the main renewable resources among countries self-produced energyresources. For both there are laws that govern their rational use and the conservation of forest and waterresources, which in some cases include clauses and articles that refer to energy uses. Some countries havenew judicial frameworks dealing specifically with forestry; this is not the case with water, in which mostcountries are discussing initiatives to update the corresponding legislation. Note the necessary andconvenient links that should exist between both sets of norms, especially in terms of integrated basinmanagement, an issue that has not yet been fully included in the respective laws. One important aspectinvolves international basins, whose management is based on old treaties governing international limits,with no recent protocols or accords that refer to resource management and administration.

A summary of the main laws making up the judicial and regulatory framework governing RESfollows for each country, highlighting the particular conditions and incentives to support and promote

these sources, which mostly refer to the electrical industry.

(a) Costa Rica

This is undoubtedly the country with the broadest most coherent regulatory and legal frameworkregarding RES. The four main precepts contained in national laws are: (i) The Organic EnvironmentalLaw, which establishes that energy resources are essential factors for the countrys sustainabledevelopment, indicates that the State will retain control of them, being able to dictate general and specificmeasures, regarding research, exploration, operation and the development of these resources, based ondispositions contained in the National Development Plan (article 56, Organic Environmental Law 7554).Moreover the State must evaluate and promote exploration for and the use of alternative energy sourcesthat are renewable and environmentally healthy, to contribute to sustainable economic development

(article 58 of the same Law); (ii) The Law creating the Costa Rican Electricity Institute (Ley de Creacindel Instituto Costarricense de Electricidad, ICE) charges this agency with the rational development of thesources producing physical energy that the Nation possesses, especially hydro resources (article 1, Law449, 1949); (iii) Executive Decree N 30480 from the Ministry of the Environment and Energy (MINAE),establishes that the management of water resources is governed by a series of principles that must beincorporated in public institutions work plans, including the promotion of alternative renewable energysources that reduce or eliminate the impact of this activity on water resources, which is in line with thegeneral policy of the Government of the Republic to implement environmental conservation policiesthrough encouraging alternative and renewable sources for electrical energy generation, such as wind,


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biomass, solar energy, as established in both the Third National Energy Plan and the NationalDevelopment Plan 2002-2006, and (iv) Directive 22 (D22-26389, 25 March 2003), instructs members ofthe electrical subsector to encourage the use of new technologies that employ new and renewable sources,when these are environmentally friendly and technically and economically feasible, as established in the

Third National Energy Plan and the National Development Plan.

In terms of forestry resources, the Organic Environmental Law establishes that the State is requiredto conserve, protect and administer forestry resources. The Forestry Law, in its first article, adds that it is anessential and priority function of the State to ensure the conservation, protection and administration ofnatural forests and the production, good use, industrialization and development of the countrys forestryresources for this end, according to the principle of the suitable and sustainable use of renewable naturalresources, and assigns supervision of this sector to the MINAE. This law also defines the environmentalservices of forests and forest plantations according to their direct impact on protecting and improving theenvironment. These services include protecting water for urban, rural or hydroelectric use. 11

On water resources, the Environmental Law sets criteria for conserving and sustainably using

water. One of the priorities is modernizing the current regime (which dates from 1942). To do so, theAssembly and the Executive are analysing a proposal for a new water law.

In terms of specific laws concerning RES, these are found in the electrical industry area. Theyconsist of two parallel autonomous generation laws and a law on participation in cooperatives andmunicipalities, which have been fundamental to private sector participation and that of other public andsocial institutions in developing RES. These refer to limited capacity electrical generation stations (smalland medium-scale).

The first two laws (on parallel autonomous generation) authorize the ICE to hire private bodies,cooperatives and municipalities, under different systems, to produce the equivalent of up to 30% of theinstalled capacity of the national interconnected electrical system, provided that generation is based on

RES. The third law establishes the legal regulatory framework for concessions granting the use of publicdomain waters to rural electrification cooperatives, consortia formed by same, and municipal publicutility companies. It also establishes the conditions for the same parties to generate electrical energy usingrenewable and non-renewable energy resources. In every case, the projects developed must be compatiblewith the National Energy Plan.

The state company acts as the sole buyer through a regulated price scheme. Exchange tariffs areregulated according to the alternative cost principle, applied to investment in and operation of the nationalinterconnected system. In the case of electric power plants with a capacity of over 20 MW, contracts can lastup to 20 years and energy must be purchased through a competitive regime or at public auction.Moreover, the law promotes and protects local investors, who must contribute at least 35% of the totalinvestment.

11 The environmental services defined by the Law are the following: mitigation of greenhouse gases (throughfixing, reducing, capturing, storing and absorbing), protection of water for urban, rural or hydroelectric use,protection of biodiversity to conserve it and for sustainable, scientific, pharmaceutical use, genetic improvementand research, protection of ecosystems, forms of life, natural scenic beauty for tourism and scientific ends.


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(b) El Salvador

The environmental law states that the sustainability of renewable natural resources must beensured (Environmental Law, Decree No. 233, 4 May 1998). In terms of the sustainable management of

forests, it delegates to the Ministries of the Environment and Natural Resources (MMARN) andAgriculture and Ranching (MAG) responsibility for preparing the market mechanisms that will facilitateand promote reforestation, keeping in mind the forests economic value and considering non-loggableresources, environmental services (protection of water resources, soil, biological diversity, energy andcarbon fixation).

The forestry law was recently passed (Legislative Decree 852, 22-3-2002) and establishesregulations for promoting the sustainable management and use of forestry resources and the developmentof the logging industry, declaring the countrys development of its forestry sector to be of economicinterest (from plantations to the final use and including every form of added value).

For water resources, it is the MMARNs responsibility to prepare a draft law and regulation for

the administration, use, protection and management of water, according to criteria established in theenvironmental law. Currently a draft general waters law is being debated, which proposed creating aregulatory agency and considers the participation of users (institutions involved in sanitation, culverts andsewer systems, such as municipalities, private companies and NGOs).

On RES, the main laws have dealt with their use to produce electricity. In 1945, the Lempa RiverExecutive Commission (Commission Ejecutiva del Ro Lempa, CEL) was set up as an autonomous publicservice institution to develop, conserve, administer and use the countrys energy resources and sources ofenergy (Decree No. 130, 3-10-1945). In 1996, the general electrical law was approved; its main purpose isto develop a competitive electrical market in every one of the subsectors activities (Decree No. 93-96,13-11-1996). This Law and its regulations establish the principles governing the development andincorporation of new generation, including RES-based projects, through private initiative and their sale

within the electrical system. With reforms to the electrical industry, the CEL was restructured and hasremained basically in charge of hydro-electrical production. The regulatory agency (the Superintendent ofCommunications and Electricity (Superintendencia de Comunicaciones y Electricidad, SIGET) has issuedseveral rulings regarding the granting of geothermal energy and hydroelectric power concessions,eliminating red tape and facilitating permits for small-scale renewable projects.

(c) Guatemala

The constitution makes several indirect references to RES: reforestation and forest conservationhave been declared matters of national urgency and social interest; waters are declared public domaingoods and their use is granted according to social interest, with a specific law to regulate this areaupcoming, and electrification is also declared a matter of national urgency.

In terms of forestry, the respective law establishes that these resources can and should form thefundamental basis of the countrys economic and social development. It recognizes that the sustainableuse of forestry resources can help to satisfy needs in energy, housing, food, and mentions carbon fixationas one of the services that will improve the populations quality of life (Forestry l

eclac/gtz, renewable energy sources in latin america and the caribbean: situation and policy...

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